HH admits 'poor financial control' in worldwide operations

HH Associates has admitted to "poor financial control on a global scale" during 2008 and 2009, resulting in a big financial hit for the group and the re-stating of its prior year results.

Losses ballooned to £4.3m for the year to 31 March 2010 (pre-tax loss: £1.7m), exacerbated by a £2.6m adjustment for items not properly accounted for in the previous two years at the Sutton-headquartered print management giant.

The directors' report said: "In mitigation, the HH ethos was derived from one of fast growth and highly motivated staff that believed in looking forward, but with poor financial control on a global scale."

The miscalculations were attributed to issues such as cut-off errors, where sales were allocated to the wrong month, particularly in its continental Europe operations, as well as incorrectly assigning inter-company trading. HH has subsidiaries in 17 countries worldwide.

It also reduced its Nordics footprint by selling the HH Denmark operation to local management in November 2009 – a move said to have "eliminated most of the low margin print-broking business no longer core to the group".

With a new board in place – former Communisis chairman Stuart Wallis, along with finance director Andrew Lipinski, joined HH as directors last September – the firm said corrective action had now been taken, including improved financial and cash controls, cost reduction and the elimination of unprofitable contracts.

"We've drawn a line under it," Lipinski told PrintWeek. "Our D&B [credit risk] score has just been re-rated and it's probably one of the most dramatic upgrades ever," he stated. "We now have a completely rejuvenated team – this business could easily double or treble in size in two or three years' time."

A new £12m invoice discounting facility was secured with Credit Agricole in February, together with a £5m factoring facility, covering Germany, Spain and The Netherlands.

February also marked the end of an era for the group with the resignation of director Howard Hunt, the original HH referenced in the company name.

For the year to 31 March 2010, turnover fell 8.8% to £89m, while gross margins increased to 17.4% from 16.8%. HH also cut net debt by £2.8m and boosted its cashflow by pushing out its payment terms with suppliers from 60 to 90 days.

The amount owing to trade creditors increased to £23.5m from £20.6m at the year-end.

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